The European Union-Singapore Free Trade Agreement (FTA) was initialled by the chief negotiators from both sides on 20th September 2013 and will come into effect in 2015.
Currently, without the FTA, around 65 per cent of EU imports already have duty-free access.
According to analysis by the European Commission, the agreement could boost Singapore exports to the EU by S$5.91 billion (3.5 billion euros) over a ten-year period.
And EU exports to Singapore could rise by S$2.4 billion (1.4 billion euros) over the same period.
The analysis also estimates that as a result of the agreement, real EU GDP (gross domestic product) will grow by around 550 million euros over ten years, while the Singapore economy is expected to grow by 2.7 billion euros over the same period.
The disparity is due to the large difference in size between the two economies.
EU Chief Negotiator Rupert Schlegelmilch said: "If you look at some of our hard-hit economies in Europe, like Spain, one thing which is going well is exports. So trade is part of the recovery programme, and whatever we can do in the trade area -- by opening up further, by making it easier to have access to other markets, and also to be open to competition from third countries like Singapore, to have our economies made more competitive -- all of that helps. So it's a clear part of our strategy to revitalise and bring Europe back on the growth trajectory."
Singapore Chief Negotiator Keith Tan said: "If a company manufactures products in Singapore, but it imports its inputs and raw materials from ASEAN, it can count those ASEAN materials and inputs as if they were Singapore-originating and therefore this means that a larger number of Singapore products will be able to qualify for the concessions of the FTA."
The Ministry of Trade and Industry says that based on Singapore's latest bilateral trade figures in 2012, S$23.2 billion worth of Singapore goods representing 80 per cent of all EU tariff lines will qualify for immediate tariff-free treatment.
The remaining S$4.3 billion worth of Singapore goods representing 20 per cent of tariff lines will qualify at three or five years after the agreement enters into force.
But with the EU also exploring FTAs with Thailand, Malaysia and Vietnam, experts say it is a matter of time before some of Singapore's first mover advantage -- when it comes to removing tariff barriers on merchandise trade -- gets eroded.
Mizuho Bank senior economist, Vishnu Varathan said: "Some of these benefits that are derived, for example, the ability to get raw materials sourced from ASEAN - that may be on borrowed time, to the extent that neighbouring countries in ASEAN will also want to move up the processing chain, and they would also want to be involved in the competition for processing and exporting food."
Economists say it is the removal of non-tariff barriers that will have a greater impact on Singapore's services-driven economy. For instance, consumer electronics and telecommunication products that conform to relevant Singapore or EU standards can be sold in the respective countries without additional testing or certification requirements.
There are also provisions in the FTA for the future mutual recognition of professional qualifications.
Mr Vishnu said: "Over 65 per cent of (the Singapore) economy is the service sector. So the ability to get services across into the EU, I think that will place industries on a better footing. This is where Singapore can leverage its position as a regional hub for a lot of the financial services and legal services (firms)."
Currently, without the FTA, around 65 per cent of EU imports already have duty-free access.
According to analysis by the European Commission, the agreement could boost Singapore exports to the EU by S$5.91 billion (3.5 billion euros) over a ten-year period.
And EU exports to Singapore could rise by S$2.4 billion (1.4 billion euros) over the same period.
The analysis also estimates that as a result of the agreement, real EU GDP (gross domestic product) will grow by around 550 million euros over ten years, while the Singapore economy is expected to grow by 2.7 billion euros over the same period.
The disparity is due to the large difference in size between the two economies.
EU Chief Negotiator Rupert Schlegelmilch said: "If you look at some of our hard-hit economies in Europe, like Spain, one thing which is going well is exports. So trade is part of the recovery programme, and whatever we can do in the trade area -- by opening up further, by making it easier to have access to other markets, and also to be open to competition from third countries like Singapore, to have our economies made more competitive -- all of that helps. So it's a clear part of our strategy to revitalise and bring Europe back on the growth trajectory."
Singapore Chief Negotiator Keith Tan said: "If a company manufactures products in Singapore, but it imports its inputs and raw materials from ASEAN, it can count those ASEAN materials and inputs as if they were Singapore-originating and therefore this means that a larger number of Singapore products will be able to qualify for the concessions of the FTA."
The Ministry of Trade and Industry says that based on Singapore's latest bilateral trade figures in 2012, S$23.2 billion worth of Singapore goods representing 80 per cent of all EU tariff lines will qualify for immediate tariff-free treatment.
The remaining S$4.3 billion worth of Singapore goods representing 20 per cent of tariff lines will qualify at three or five years after the agreement enters into force.
But with the EU also exploring FTAs with Thailand, Malaysia and Vietnam, experts say it is a matter of time before some of Singapore's first mover advantage -- when it comes to removing tariff barriers on merchandise trade -- gets eroded.
Mizuho Bank senior economist, Vishnu Varathan said: "Some of these benefits that are derived, for example, the ability to get raw materials sourced from ASEAN - that may be on borrowed time, to the extent that neighbouring countries in ASEAN will also want to move up the processing chain, and they would also want to be involved in the competition for processing and exporting food."
Economists say it is the removal of non-tariff barriers that will have a greater impact on Singapore's services-driven economy. For instance, consumer electronics and telecommunication products that conform to relevant Singapore or EU standards can be sold in the respective countries without additional testing or certification requirements.
There are also provisions in the FTA for the future mutual recognition of professional qualifications.
Mr Vishnu said: "Over 65 per cent of (the Singapore) economy is the service sector. So the ability to get services across into the EU, I think that will place industries on a better footing. This is where Singapore can leverage its position as a regional hub for a lot of the financial services and legal services (firms)."
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